Regional tax differentials: A Kaleckian approach

The paper presents a Kaleckian approach to the analysis of the incidence and macroeconomic effects of national and local taxes. The micro-and macro-economic foundations of the model are developed. These are then used to identify the effects on the UK, Scottish and rest of the UK economies if the Scottish Parliament were to exercise its income tax-varying powers under the Scotland Act. The paper concludes that because Scotland is a small, open economy, the Scottish Parliament would be advised not to increase government spending in Scotland funded by an increase in the standard rate of income tax in Scotland. © 2005 Regional Studies Association.